‘Interest won’t hit 5.25% peak’

THE Bank of England’s chief economist says interest rates are unlikely to hit the 5.25 per cent predicted peak.

But Huw Pill warns that monetary policy can’t run on “autopilot”.

He will tell the Institute of Directors today: “In line with the Monetary Policy Committee’s (MPC) most recent forecast… I do not anticipate the levels of bank rate priced in financial markets… will be required.

“But… further action is likely to be required to ensure inflation [returns] to its 2 per cent target.”

Mr Pill will emphasise the Bank’s plans must respond to changes in the economy, despite its sale of government gilts.

He will add: “The MPC will use bank rate as its active instrument to address new shocks… leaving the [gilts sales] to run ‘in the background’ as long as market conditions permit.”